jpod

I don't know if it has been addressed or not, and I hear what you are saying about the use of the phrase "nonelective contribution," but I've always assumed that it is treated as a match for vesting purposes under the terms of the plan. This is just based on the basic premise that the correction is designed to put the participant in the position he would be in had the error not occurred.

You say that you need to make the $40,000 in savings "disappear" for financial aid purposes. I am not in a position to question that. Assuming you are right about that, and further assuming you can't get any satisfaction from your employer and ADP, if I were in your shoes I would go to a bank or credit union and take a personal or home equity loan for $10,000 so I had enough money to pay off the loan in full. You'll just be paying interest to the bank on the $10,000 rather than yourself, but it sounds like it would be worth it for financial aid purposes.

What do the terms of the loan say about this? I doubt the loan terms leave flexibility for the plan administrator or any other party to change them without your consent. ADP may be saying "we can't/won't/don't wish to deal with this," but that doesn't mean you can't pay down the loan as you see fit.

I had hoped that Carol Calhoun might chime in because her observations are always useful. Maybe she's on a beach somewhere this week!

It's a pickle. I was thinking about issuing a late 2009 W-2 for the account balance at 12/31/09, then one for 2010 reporting any increases in the balance through 12/31/10, etc., etc. However, due to statute of limitations issues I thought the IRS would be happy with reporting everything in full as a 2016 event. Participant can fight it out with IRS if he would like to hide behind statute of limitations for closed years.

Tax-exempt 457(b). Employee terminated in June 2009. Because he made no deferral election, entire account balance was to be distributed 90 days after termination. No distribution was made, and error not discovered until 2016! We have no idea what participant knew or thought at the time. 1. Was it "made available" in 2009 and therefore taxable? 2. If so, was it reportable on W-2 and subject to withholding in 2009, even though there was no actual distribution? IRS Notice 2003-20 implies that it was. 3. Is this an operational error that places entire plan at risk? If so, any ideas as to what to do other than distribute the entire account balance now and report it on a 2016 W-2 with income tax withholding?

I agree 100% with that observation about the term "merger" often being used loosely. However, the advice here was to "merge" the 403(b) into the 401(a) (rather than vice versa), and a so-called "termination" of a 403(b) is usually not a distributable event.

Mergers of 401(a)s and 403(b)s cannot be done, having nothing to do with ERISA.

Not sure this would work to allow deductions for any tax year in which there was no plan document or trust agreement by the end of the tax year.

If it says that "any" 409A CIC is a trigger, I believe that a certain level of change in board composition would be a trigger, but you'd have to look that up. Other than that I would say analogizing doesn't work. Why doesn't the employer just recognize that this was less than good drafting and amend the plan to have it say what the employer would like it to say?

If it's going to be a trigger for simultaneous vesting and distribution, you don't need a 409A-compliant definition.

What definition in which regs and how is a CIC relevant under the 457(f) arrangement? With answers to those questions perhaps we can help.

I can't imagine a scenario or theory that would make a missed match a PT.

There may be cases, but I am not aware of any, but I have never researched it either. I wonder what California law says about the effect of annulment on third parties. That could be very relevant.

I am almost 100% sure there is an IRS Rev. Rul. that says you can use the earnings component derived from the DOL calculator.

I am not aware of any such prohibition. On what basis was that interpretation considered a reasonable interpretation? An unreasonable interpretation is susceptible to significant risk no matter how consistently it's been used.

Unlike you I didn't think the OP was looking for a lecture on plan administration practices. I was only suggesting that heroic measures aren't necessary for SARs presumably mailed in good faith to the last known address but which have been returned.

Let's be real: we're talking about SARs here.

The election is made by the participant to have its employer withhold compensation and contribute it to the plan. In a partnership, that election is made by the partner to have the partnership withhold compensation. In the case of an unincorporated sole proprietor, it is impossible for the sole proprietor to make such an election because all money is all ready in his hands. So, ok, before the end of the year you write a note to yourself and stick it in a drawer. What policy goal does that achieve?

Is he an unincorporated sole proprietor filing a Schedule C, without even an LLC disregarded entity? If so, while some may disagree, a 401k election prior to the end of the year in my opinion was unnecessary and would have been meaningless, and he can make his deferral contributions - catch-up or otherwise - at any time up to the extended due date of the 1040.

I am reading the additional facts to mean that he needs $30,000 after tax, so he really needs maybe $50,000 pre-tax, assuming there is a 10% additional 72(t) tax. Hard to believe it makes sense to use $50,000 of tax deferred retirement money just for the sake of keeping a house, but I guess there could be other, non-financial factors in play for keeping the house at all costs.

I am not following your point 2. The facts stated are that he CAN satisfy the $30K obligation by selling the house, or at least that's my interpretation of what is stated. Maybe there isn't enough equity for a second mortgage or home equity loan, but there must be enough equity after commission and other closing costs to cover the $30k or why would it even be a "sad" alternative?

Does he need $30,000 before tax and 10% penalty or $30,000 after tax and penalty? Regardless, and admittedly not responsive to the question, but if there is sufficient equity in the house which can be pulled out tax-free maybe he's better off financially selling the house.

For those QDRO experts who are also familiar with what Judges might do in these situations, a follow up question: Is it conceivable that the state court having jurisdiction here would be willing to enter a DRO to award part (or all!) of this now defunct benefit to the ex-spouse of a LONGGG-deceased participant?

I have a client that may be facing this situation. Participant in a DB plan and spouse divorced many years ago while participant was still active employee. Participant terminated with vested benefit payable only at NRA, never remarried, then dies prior to NRA. No benefit was payable under the Plan as a result of or following his death. Ex-spouse (they were divorced about 15 years ago) somehow found out about the employer's DB plan and is now poking around and making allegations that neither she nor participant knew anything about him having a DB benefit, the implication being it would have been divided in the divorce in some fashion had they known about it. With what is presumably the intent of trying to get a post-death QDRO, she has made a request for Plan documents and information about her ex-spouse's accrued benefit. Questions: Can any DRO at this point possible be a valid QDRO? (I maintain that now that the participant is deceased and no benefit is payable then it is impossible to have a QDRO now because it would require the Plan to pay something more than it is required to pay, which at this point in time is $0.) Putting that aside, even under a liberal interpretation of "beneficiary" as defined in ERISA, is she a beneficiary entitled to Plan documents/information because she MAY be able to get a QDRO awarding her benefits? (An alternate payee is a beneficiary, but is someone who COULD become an alternate payee a beneficiary?)